EPS Diluted, also known as Diluted Earnings Per Share, is a financial metric that calculates the earnings per share of a company by taking into account the potential dilution of the company's existing shares due to the issuance of new shares, stock options, or other securities that can be converted into shares.
The Diluted EPS calculation assumes that all potentially dilutive securities are converted into shares, which can reduce the earnings per share. This calculation is used to give investors a more accurate picture of a company's earnings potential, taking into account the effect of potential dilution on current shareholders.
The formula for Diluted EPS is: Diluted EPS = (Net Income - Preferred Stock Dividends) / (Weighted Average Shares Outstanding + Dilutive Securities)
Dilutive Securities are included in the denominator of the Diluted EPS formula, which increases the number of shares outstanding and reduces the earnings per share. Therefore, Diluted EPS is generally lower than Basic EPS, which only takes into account the common shares outstanding and does not include the effect of dilutive securities.